Among the most heralded announcements of George Osborne’s November 2015 Spending Review was the pledge to increase NHS England’s budget by more than £8 billion per year (relative to 2014/15) by 2020/21. This, the Government claimed, honoured the request made in the Five Year Forward View in October 2014, once targeted efficiencies and savings are taken into account, for additional funding in order to “sustain a comprehensive high-quality NHS”.

Since the publication of the Five Year Forward View however, there have been a number of developments. Increasingly, many hospitals are missing the four hour A&E target. Bed demand is at record levels, with many hospitals recording occupancy levels of over 90 per cent. And NHS providers are on course for a projected deficit of £2.8 billion this financial year alone, whereas the figure for 2013/14 was under £100 million. Against this backdrop, Osborne’s trumpeted £8 billion suddenly seems to go a lot less far.

One of the major contributing factors to this alarming situation is the delay many hospitals face in transferring patients out of their care into more appropriate settings once these patients – often frail and elderly – are no longer in need of the acute treatment or specialised medical attention provided within hospitals.

If no alternate care provision is readily to hand, these patients can end up occupying expensive beds, through no fault of their own. This has detrimental effects not only for the hospital’s finances but also for the patient’s wellbeing. It also of course prevents this bed being made available for other patients who may be in need of the hospital’s resources.

ResPublica has this week published a report examining this issue of delayed transfers of care. We estimate that the cost to the public purse of providing inappropriate in-hospital care for patients over the past five years has been £2.1 billion.

Over the coming five years, we anticipate that this cumulative cost will rise to £3.3 billion, with £763 million being spent in 2020/21 alone. Lowering these costs would reduce the extent to which the NHS’ much-needed new money will be swallowed up by this inefficient spending.

A key principle at the heart of our report is that it makes no sense to put extra funding into the NHS unless social care services are sufficiently well-resourced to back up healthcare provision. Health and social care are together an ecosystem; to treat them as isolated entities, diverting additional funding to the NHS while social care budgets are cut dramatically (local authority spend on older people’s care for instance has seen a 17 per cent real terms cut since 2009/10), is illogical and risks wasting significant amounts of public money.

The Government points to two steps it took in the Spending Review to increase the funding available to social care: a discretionary 2 per cent local precept on council tax, and a £1.5 billion uplift for the Better Care Fund by 2019/20. As our report makes clear, however, we believe neither of these measures will deliver the funding required, either in isolation or in conjunction, to return the social care sector to full strength. As long as social care remains on the precipice, the NHS will suffer.

Our report therefore proposes a ‘Fast Track Discharge Fund’, a multi-year funding pot designed to pay for out-of-hospital beds and investment in residential care facilities. This would provide the financial resources required to allow patients who do not need to be in hospital to be discharged to care homes, which would provide services such as step-down care (a ‘stop-over’ between hospital and home) or offer a more comfortable environment in which to await further assessment.

This Fund would be paid for out of existing NHS budgets. We propose to ring-fence £3.3 billion, equal to the sum we project will be spent by hospitals providing beds for patients affected by delayed transfer of care up to 2020/21, and allocate this to our Fund over these next five years.

Our analysis found that once the cost of providing residential care beds for these patients has been accounted for, there would remain a surplus of around £2.4 billion for investment in residential care, to train and upgrade clinical care staff and facilities – allowing the sector to step up to an expanded role caring for these patients safely in the community, outside of hospital.

We are not arguing for new expenditure, but simply for more efficient use of money which is already destined to be spent. And our proposal solves two problems at once: it will both reduce demand and financial strains on hospitals, while simultaneously offering vital new funding for a portion of the social care sector which has been desperately affected by cuts since 2010. We believe this two-fold advantage makes our recommendation one which the Government cannot afford not to implement.